China to bring online nearly 3 mil mt/year new primary aluminum capacity in 2021

　　China's primary aluminum output totaled 37.08 million mt in 2020, up 4.9% compared with a year ago. All market participants expect China's primary aluminum output to increase in 2021, driven by high profit margins, according to the Platts China Alumina and Aluminum Outlook published in January.

　　Actual production from these new projects will take time to ramp up due to construction schedules, stability of power supply and other factors, industry sources said, adding that it will take at least one to three months for the new projects to reach the designed capacity.

　　By the end of 2020, China's primary aluminum capacity was projected to have reached 42.63 million mt, up 3.1% from a year earlier, China's state-owned researcher, Antaike, estimated. The operating capacity will hit 39.26 million mt, up 9% from a year ago.

　　Yunnan province, in southwest China, has become the new hub for primary aluminum production due to access to hydro power in the mountainous region. Roughly 1.68 million mt of new capacity came online in 2020, accounting for about 71% of the country's total.

　　Yunnan Shenhuo Aluminum, Wenshan Aluminum and Yunnan Hongtai New Materials, which are located in Wenshan Zhuang and Miao Autonomous Prefecture, put a total of 1.2 million mt/year of new capacity into operation in 2020 with an output of 480,000 mt, according to a report released by the Yunnan website, a state-owned website held by the Yunnan Daily.

　　Increasing output and the opening of the import arbitrage window could lead to an oversupply of aluminum in the domestic market in 2021, market sources said. However, aluminum will remain profitable for Chinese smelters in 2021 as prices are expected to hover at high levels, while alumina prices are unlikely to see any significant increase.